Lawmakers hit Google, Yahoo on China deals

February 16, 2006|By David Greising, Chief business correspondent.

WASHINGTON — Google and Yahoo found themselves denigrated as tools of China's communist government in a congressional hearing Wednesday designed to expose the price they pay to do business in the world's largest market.

The two Internet giants were among four computer companies summoned to Capitol Hill to answer questions and face rebukes for their activities in China, which have involved acquiescing to Chinese censorship laws.

In response, Google stated it could abandon China if censorship causes major business disruptions, while Yahoo took responsibility for inadvertently assisting in the arrest of a Chinese dissident.

The hearing--and the withering criticisms directed at the four--put into stark relief the complexities and compromises facing the high-flying Internet companies as they try to follow traditional American exporters in building global brands.

Unlike automakers or consumer products marketers, when companies like Yahoo and Google do business in countries with repressive regimes, they at times are accused of being complicit in supporting censorship and stifling political dissent.

This is an even more sensitive issue for the Internet companies because of the powerful images they have cultivated as champions of open communication.

Indeed, the central question of the hearing--and the conundrum before these big businesses--was whether they have a moral obligation to reject China's demands.

Yahoo received a stinging admonition for turning over e-mail account information that led to the imprisonment of a Chinese dissident, Shi Tao. A Yahoo affiliate in China provided the information without requiring a court order from Chinese authorities.

Google came in for perhaps the strongest criticism at the hearing. The Internet giant launched a China version of its search engine that blocks users from obtaining information about the Tiananmen Square massacre, the Falun Gong religious group, and other topics banned by Chinese censors.

"This makes you a functionary of the Chinese government," U.S. Rep. Jim Leach (R-Iowa) said after eliciting testimony from Google's representative indicating that the company models its list of forbidden search terms directly from those on official Chinese search engines.

Elliot Schrage, Google's vice president of global communications and global affairs, told Leach that Google's system was more complicated than participating willingly in censorship.

"We are not showing the full results because of [Chinese] government restrictions," Schrage stated.

Schrage and representatives from Yahoo, Microsoft and Internet computer company Cisco Systems sought to cast a positive light on their China activities. Some Internet search capability is better than none, they argued.

Yahoo tried to inoculate itself before the testimony before the House subcommittee on Africa, Global Human Rights and International Operations by floating a new policy statement about a commitment to "open availability of the Internet around the world."

Yahoo in its statement tried to place the responsibility on the U.S. government to prod undemocratic regimes to relax censorship rules.

Schrage acknowledged that Google's decision to create Google.cn especially for China was at times an unsatisfactory compromise.

It went against "Google's most basic values and commitments as a company," Schrage said. But the company went ahead because Google decided it could make "a meaningful, though imperfect, contribution to the overall expansion of access to information in China."

Google's commitment to its China business is not absolute, though.

Schrage said that the company could pull out of China if it felt that it could not meet internal goals including protecting user privacy, disclosing to users when a search has been censored, and continuing to offer an unfiltered Google.com--which performs poorly in China because of apparent tampering by authorities.

During the course of the hearing, aides to U.S. Rep. Chris Smith (R-N.J.) circulated the draft of a bill that would limit the China activities of U.S.-based Internet firms, and the U.S. State Department on Tuesday announced plans to lead a new international task force that would promote free expression on the Internet.

Smith's bill would require U.S.-based Internet companies to locate their computer servers outside of China, presumably out of the reach of Chinese censors. The proposal seems tailored to block censors from seizing computer files and arresting dissidents who use the Internet to, in the view of authorities, foment social unrest in China.

However, operating from outside the country could eliminate crucial business opportunities, including selling local advertising.